The Kick-out Clause: Your Key to avoiding a Contingency.

Kick-out clause framework, kick out clause in action, pros and cons, hot market impact, Frequently asked questions

A kick-out clause allows a seller to reject an accepted offer in favor of a new one from another buyer.

A kick-out clause generally benefits both parties and applies to one situation, where a buyer wants to sell their current house before buying a new one.

The buyer's desire is accepted by the seller.The seller doesn't want to wait for the buyer to sell their house.

The solution is that the seller has the right to kick out the first buyer.

Ramona Williams is an agent with Keller Williams Partners in Colorado Springs, Colorado.

A kick-out clause is a condition in a home-purchase contract that must be met before the contract becomes legally binding.

It's not a common contingency for a buyer to ask for when they need to sell their house.

Only a small percentage of home-contract contingencies are focused on the buyer selling their current home.

The kick-out clause allows sellers to market their home to other potential buyers while the initial buyer tries to sell their house.

Then what?The buyer moves forward with the purchase of the seller's home when the kick-out clause is no longer needed.

Then what?The seller can invoke the kick-out clause if the new offer doesn't come with a contingency that the buyer has to sell their house.

The document states that the original buyer has a limited amount of time to make a decision.Unless the parties have negotiated for more or less time at the beginning of the offer, the deadline is usually 72 hours.

The buyer will usually get back their earnest money, the good-faith deposit that's typically paid during a home purchase.

"In a seller's market, we are seeing lots of competing offers on every home," says Colorado Springs, Colorado-based agent Ramona Williams.Most of the time, the kick-out clause puts them in last place as a buyer to purchase a home.

There are some moves a buyer can make to avoid a kick-out clause.

Williams says that a buyer can borrow from their 401(k) to make the down payment on a new home, eliminating the need to sell their house first to free up financing.The buyer can pay back their 401(k) once they sell their house.

There are some risks with the 401(k) option.A good agent can help you figure out what's best for you and your situation.

The seller can't kick out the buyer for another offer because they accepted an offer with contingencies.

The contract could be terminated if the buyer doesn't meet other contingencies.

When using a kick-out clause, the only money paid is earnest money, which is a good faith down payment that's part of any home purchase.

The buyer will get their money back if the seller uses the kick-out clause.